tag:theconversation.com,2011:/columns/jay-l-zagorsky-152952The Eclectic Economist – The Conversation2017-08-29T13:35:44Ztag:theconversation.com,2011:article/645262017-08-29T13:35:44Z2017-08-29T13:35:44ZHave we forgotten the true meaning of Labor Day?<figure><img src="https://images.theconversation.com/files/136006/original/image-20160830-28253-doourx.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=496&amp;fit=clip" /><figcaption><span class="caption">The first Labor Day was hardly a national holiday. Workers had to strike to celebrate it. </span> <span class="attribution"><a class="source" href="https://www.dol.gov/LaborDay/2014/img/highlight-img2.jpg">Frank Leslie&#39;s Weekly Illustrated Newspaper&#39;s September 16, 1882</a></span></figcaption></figure><p><a href="https://www.dol.gov/general/laborday/history">Labor Day</a> is a U.S. national holiday held the first Monday every September. Unlike most U.S. holidays, it is a strange celebration without rituals, except for shopping and barbecuing. For most people it simply marks the last weekend of summer and the start of the school year.</p>
<p>The holiday’s founders in the late 1800s <a href="http://www.jstor.org/stable/2079344">envisioned something very different</a> from what the day has become. The founders were looking for two things: a means of unifying union workers and a reduction in work time.</p>
<h2>History of Labor Day</h2>
<p>The first Labor Day occurred in 1882 in New York City under the direction of that city’s <a href="https://www.questia.com/library/1459046/history-and-functions-of-central-labor-unions">Central Labor Union</a>. </p>
<p>In the 1800s, unions covered only a small fraction of workers and were <a href="http://www.merriam-webster.com/dictionary/balkanize">balkanized</a> and relatively weak. The goal of organizations like the Central Labor Union and more modern-day counterparts like the <a href="http://www.aflcio.org/">AFL-CIO</a> was to bring many small unions together to achieve a critical mass and power. The organizers of the first Labor Day were interested in creating an event that brought different types of workers together to meet each other and recognize their common interests.</p>
<p>However, the organizers had a large problem: No government or company recognized the first Monday in September as a day off work. The issue was solved temporarily by <a href="http://www.jstor.org/stable/2079344">declaring a one-day strike in the city</a>. All striking workers were expected to march in a parade and then eat and drink at a giant picnic afterwards. </p>
<p>The <a href="http://chroniclingamerica.loc.gov/lccn/sn83030214/1882-09-07/ed-1/seq-4/">New York Tribune’s reporter covering the event</a> felt the entire day was like one long political barbecue, with “rather dull speeches.”</p>
<h2>Why was Labor Day invented?</h2>
<p>Labor Day came about because workers felt they were spending too many hours and days on the job. </p>
<p>In the 1830s, <a href="https://eh.net/encyclopedia/hours-of-work-in-u-s-history/">manufacturing workers</a> were putting in 70-hour weeks on average. Sixty years later, in 1890, hours of work had dropped, although the average manufacturing worker still toiled in a factory 60 hours a week. </p>
<p>These long working hours caused many union organizers to focus on winning a shorter <a href="http://www.businessinsider.com/history-of-the-40-hour-workweek-2015-10">eight-hour work day</a>. They also focused on getting workers more days off, such as the Labor Day holiday, and reducing the <a href="https://eh.net/encyclopedia/hours-of-work-in-u-s-history/">workweek to just six days</a>.</p>
<p>These early organizers clearly won since the most recent data show that the average person working in manufacturing is <a href="http://www.bls.gov/news.release/empsit.t18.htm">employed for a bit over 40 hours a week</a> and most people work only five days a week.</p>
<p>Surprisingly, many <a href="http://press.princeton.edu/titles/6555.html">politicians and business owners were actually in favor of giving workers more time off</a>. That’s because workers who had no free time were not able to spend their wages on traveling, entertainment or dining out. </p>
<p>As the <a href="https://www.youtube.com/channel/UCcMxc7kEkx_0HCkI_Dxo7ow">U.S. economy</a> expanded beyond farming and basic manufacturing in the late 1800s and early 1900s, it became important for <a href="http://businessmacroeconomics.com/">businesses</a> to find consumers interested in buying the products and services being produced in ever greater amounts. Shortening the work week was one way of turning the working class into the consuming class. </p>
<h2>Common misconceptions</h2>
<p>The common misconception is that since Labor Day is a national holiday, everyone gets the day off. Nothing could be further from the truth.</p>
<p>While the first Labor Day was created by striking, the idea of a special holiday for workers was easy for politicians to support. It was easy because proclaiming a holiday, like <a href="https://www.whitehouse.gov/the-press-office/2016/05/06/presidential-proclamation-mothers-day-2016">Mother’s Day</a>, costs legislators nothing and benefits them by currying favor with voters. <a href="https://www.dol.gov/general/laborday/history">In 1887</a>, Oregon, Colorado, Massachusetts, New York and New Jersey all declared a special legal holiday in September to celebrate workers.</p>
<p>Within 12 years, half the states in the country recognized Labor Day as a holiday. It became a national holiday in June 1894 when <a href="http://history.house.gov/Historical-Highlights/1851-1900/The-first-Labor-Day/">President Grover Cleveland signed</a> the Labor Day bill into law. While most people interpreted this as recognizing the day as a national vacation, <a href="http://www.senate.gov/reference/resources/pdf/Federal_Holidays.pdf">Congress’ proclamation</a> covers only federal employees. It is up to each state to declare its own legal holidays.</p>
<p>Moreover, proclaiming any day an official holiday means little, as an official holiday does not require private employers and even some government agencies to give their workers the day off. <a href="http://www.aol.com/article/2016/08/29/best-labor-day-sales-2016/21460893/">Many stores are open</a> on Labor Day. Essential government services in protection and transportation continue to function, and even less essential programs like national parks are open. Because not everyone is given time off on Labor Day, union workers as recently as the 1930s <a href="http://www.jstor.org/stable/41814888">were being urged</a> to stage one-day strikes if their employer refused to give them the day off.</p>
<p>In the president’s <a href="https://www.whitehouse.gov/the-press-office/2015/09/08/presidential-proclamation-labor-day-2015">annual Labor Day declaration</a> last year, Obama encouraged Americans “to observe this day with appropriate programs, ceremonies and activities that honor the contributions and resilience of working Americans.”</p>
<p>The proclamation, however, does not officially declare that anyone gets time off.</p>
<h2>Controversy: Militants and founders</h2>
<p>Today most people in the U.S. think of Labor Day as a noncontroversial holiday.</p>
<p>There is no <a href="https://www.psychologytoday.com/blog/drinking-diaries/201211/avoiding-family-angst-thanksgiving">family drama like at Thanksgiving</a>, no <a href="http://www.interfaithfamily.com/holidays/hanukkah_and_christmas/December_Dilemma_Interfaith_Couples_Face_Emotional_Choices_Christmas_Hanukkah_or_Both.shtml">religious issues</a> like at Christmas. However, 100 years ago there was controversy.</p>
<p>The first controversy that people fought over was how militant workers should act on a day designed to honor workers. Communist, Marxist and socialist members of the trade union movement supported <a href="http://time.com/3836834/may-day-labor-history/">May 1 as an international day</a> of demonstrations, street protests and even <a href="http://www.pbs.org/wgbh/amex/goldman/peopleevents/e_iww.html">violence</a>, which <a href="http://www.usatoday.com/picture-gallery/news/2016/05/01/protesters-clash-with-police-at-may-day-rallies-world-wide/83792826/">continues even today</a>.</p>
<p>More moderate trade union members, however, advocated for a September Labor Day of parades and picnics. In the U.S., picnics, instead of street protests, won the day. </p>
<p>There is also dispute over who suggested the idea. The earliest history from the mid-1930s credits Peter J. McGuire, <a href="http://www.jstor.org/stable/41814888">who founded the New York City Brotherhood of Carpenters and Joiners</a>, in 1881 with suggesting a date that would fall “nearly midway between the Fourth of July and Thanksgiving” that “would publicly show the strength and esprit de corps of the trade and labor organizations.”</p>
<p><a href="https://www.jstor.org/stable/41838739">Later scholarship from the early 1970s</a> makes an excellent case that Matthew Maguire, a representative from the Machinists Union, actually was the founder of Labor Day. However, because Matthew Maguire was seen as too radical, the more moderate Peter McGuire was given the credit.</p>
<p>Who actually came up with the idea will likely never be known, but you can vote <a href="https://www.dol.gov/general/laborday/history">online here</a> to express your view. </p>
<h2>Have we lost the spirit of Labor Day?</h2>
<p>Today Labor Day is no longer about trade unionists marching down the street with banners and their tools of trade. Instead, it is a confused holiday with no associated rituals.</p>
<p>The original holiday was meant to handle a problem of long working hours and no time off. Although the battle over these issues would seem to have been won long ago, this issue is starting to come back with a vengeance, not for manufacturing workers but for highly skilled white-collar workers, many of whom are constantly connected to work.</p>
<p>If <a href="https://www.fastcompany.com/3046429/the-new-rules-of-work/the-highest-paying-jobs-of-the-future-will-eat-your-life">you work all the time</a> and never really take a vacation, start a new ritual that honors the original spirit of Labor Day. Give yourself the day off. Don’t go in to work. Shut off your phone, computer and other electronic devices connecting you to your daily grind. Then go to a <a href="http://www.wbaltv.com/news/labor-day-cookout-ideas/41411898">barbecue</a>, like the original participants did over a century ago, and celebrate having at least one day off from work during the year!</p><img src="https://counter.theconversation.com/content/64526/count.gif" alt="The Conversation" width="1" height="1" />
The holiday began as a strike against excessive workweeks but now bears little resemblance to its worker-centric origins, even as the founders' gains are slowly lost.Jay L. Zagorsky, Senior Lecturer, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/663562016-10-10T17:37:58Z2016-10-10T17:37:58ZWhy is taking photographs banned in many museums and historic places?<figure><img src="https://images.theconversation.com/files/140590/original/image-20161005-20132-i550ta.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=496&amp;fit=clip" /><figcaption><span class="caption">Westminster Abbey doesn&#39;t want you to take any selfies.</span> <span class="attribution"><span class="source">Jay Zagorsky</span>, <span class="license">Author provided</span></span></figcaption></figure><p>Have you ever pulled out your camera or phone in a museum or historic place and suddenly found a staff person telling you “no photographs”?</p>
<p>I was in London recently and it happened repeatedly in places like <a href="http://www.westminster-abbey.org/visit-us/access-and-facilities">Westminster Abbey</a>, <a href="https://www.royalcollection.org.uk/visit/buckinghampalace/plan-your-visit/practical-information">Buckingham Palace</a> and <a href="https://www.parliament.uk/visiting/access/photography-filming-and-mobile-phone-use/">Parliament</a>. </p>
<p>The no-photos policy is not limited to just England but is a worldwide phenomenon. Visitors cannot take photos in places like the <a href="http://mv.vatican.va/3_EN/pages/z-Info/MV_Info_Consigli.html">Sistine Chapel</a> in Rome, the <a href="https://www.vangoghmuseum.nl/en/plan-your-visit/house-rules">Van Gogh Museum</a> in Amsterdam or inside Thomas Jefferson’s <a href="https://www.monticello.org/site/visit/customs-courtesies">Monticello home</a>.</p>
<p>Some large art museums like New York’s <a href="http://www.metmuseum.org/visit/met-fifth-avenue">Metropolitan Museum of Art</a> and Boston’s <a href="http://www.mfa.org/visit/plan-your-visit/tips-visitors">Museum of Fine Arts</a> have <a href="http://hyperallergic.com/123203/one-of-new-yorks-most-conservative-museums-now-permits-photography/">changed their policies</a> and <a href="http://www.artnews.com/2013/05/13/photography-in-art-museums/">now allow photography</a> in parts of their permanent collections. However, they typically ban all photography in special exhibitions, which are often the main reason people are visiting.</p>
<p>What gives? </p>
<p>I decided to dig into the reasons – largely financial — that museums restrict photos. In the process, I became convinced that it’s time for museums to find creative ways to satisfy people’s desire to snap memories while keeping their collections funded.</p>
<h2>Why the ban is a problem</h2>
<p>Photography bans block our incredible desire to visually record our lives. A rough estimate of the flood of pictures being uploaded to the internet suggests we are <a href="http://www.popphoto.com/news/2013/05/how-many-photos-are-uploaded-to-internet-every-minute">taking</a> and <a href="http://www.popphoto.com/news/2013/05/how-many-photos-are-uploaded-to-internet-every-minute">sharing</a> about <a href="http://www.kpcb.com/internet-trends">one trillion digital images</a> each year. Among the most popular images being uploaded are selfies taken in front of famous objects, places and monuments.</p>
<p><a href="https://www.cnet.com/topics/phones/best-phones/camera/">Smartphones</a> and camera glasses are making documenting our lives easier than ever and encountering photo bans more frustrating. It is exasperating that many places that ban photography sell reproductions in their <a href="http://www.wsj.com/articles/SB10001424052702304403804579264612453735626">gift shops</a>. They also post brilliant high-resolution photographs on their websites of the very same artwork the public is not allowed to capture.</p>
<p>Talking to museum staff and examining <a href="http://www.artnews.com/2013/05/13/photography-in-art-museums/">articles</a>, <a href="mailto:%20https://www.flickr.com/groups/376527@N21/discuss/72157605576789238/">discussions</a>, <a href="http://museumtwo.blogspot.com/2009/08/museum-photo-policies-should-be-as-open.html">blogs</a> and <a href="http://artfcity.com/2008/01/25/no-photo-a-discussion-on-museum-photography-policy/">debates</a> reveal five reasons for the ban – all of which <a href="http://press.uchicago.edu/ucp/books/book/chicago/E/bo3684426.html">primarily boil down to money</a>.</p>
<h2>The five reasons</h2>
<p>First, camera flashes, which emit intense light, are believed to hurt paintings and the patina of delicate objects. Eliminating flashes, even inadvertent ones, keeps paintings in pristine shape and reduces expensive restoration costs. </p>
<p>However, <a href="http://www.sciencedirect.com/science/article/pii/0964777594900418">research by the Unversity of Cambridge’s Martin Evans</a> on <a href="http://people.ds.cam.ac.uk/mhe1000/musphoto/flashphoto2.htm">assessing the harm done by flash photography</a> suggests “use of electronic flash by the public poses negligible danger to most museum exhibits.”</p>
<p>Second, eliminating cameras improves the visitor experience. Visitors who enjoy a museum are more likely to come back, join as members and recommend the museum to friends. It is hard to enjoy a painting when people are crowding in front posing for selfies using sticks, which occasionally hit both artwork and other patrons.</p>
<p>People stopping to take pictures also create bottlenecks and traffic jams. Ensuring more people can visit safely and have a good experience boosts revenue.</p>
<p>It also reduces a museum’s insurance costs since some <a href="http://petapixel.com/2012/11/22/clever-canon-commercial-shows-what-photogs-will-do-for-the-perfect-shot/">photographers go through incredible contortions</a>, like hanging off of balconies, to capture the right shot. Lowering the chance of injury makes a museum cheaper to run.</p>
<p>Third, preventing photography ensures the gift shop maintains a monopoly on selling images. If photography is not allowed inside the museum or historic place then the gift shop’s books, posters and postcards are the only legitimate source for high-quality images of a famous painting, statue or room.</p>
<p>Fourth, banning photographs is believed to boost security by preventing thieves or terrorists from visually capturing and pinpointing weaknesses in alarm systems and surveillance cameras. While there are relatively few <a href="http://www.wsj.com/articles/vangoghpaintings-recovered-by-italian-anti-mafia-police-1475228719">major art thefts</a>, those that occur are headline news.</p>
<p>However, one could argue that uploading digital photographs to the internet is more likely to boost museum security than to compromise it. The more often a picture or object is recognized, the harder it is to sell after being stolen. The widespread sharing of images online means picture taking should be encouraged to reduce theft, not banned.</p>
<p>The fifth reason cited is that taking photographs often violates copyright protections. Copyright is designed to protect authors, composers and artists. When enforced, it ensures the creators are paid anytime someone wants to “<a href="http://www.copyright.gov/circs/circ01.pdf">reproduce the work in copies</a>.” </p>
<p>Copyrights typically last for the artist’s <a href="http://www.copyright.gov/circs/circ15a.pdf">life plus 70 years</a>. This means that the vast majority of museum collections of Renaissance artwork, Greek statues and Impressionistic paintings lost their copyright years ago.</p>
<p>Copyright is more of an issue for modern artwork, especially when the piece is loaned to a museum. Museums don’t own the copyright of loaned paintings or sculptures since it resides with the owner or the original artist. However, today it is relatively easy to check if an image is being sold on the internet or used for unauthorized commercial purposes to ensure the copyright holder is paid their due.</p>
<p>Personal photographs uploaded for private viewing do not harm artists. Boosting recognition of a painting or object photographs might even increase the actual value to copyright holders.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/140602/original/image-20161005-20148-1uqfkh9.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" srcset="https://images.theconversation.com/files/140602/original/image-20161005-20148-1uqfkh9.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=600&amp;h=400&amp;fit=crop&amp;dpr=1 600w, https://images.theconversation.com/files/140602/original/image-20161005-20148-1uqfkh9.jpg?ixlib=rb-1.1.0&amp;q=30&amp;auto=format&amp;w=600&amp;h=400&amp;fit=crop&amp;dpr=2 1200w, https://images.theconversation.com/files/140602/original/image-20161005-20148-1uqfkh9.jpg?ixlib=rb-1.1.0&amp;q=15&amp;auto=format&amp;w=600&amp;h=400&amp;fit=crop&amp;dpr=3 1800w, https://images.theconversation.com/files/140602/original/image-20161005-20148-1uqfkh9.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;h=503&amp;fit=crop&amp;dpr=1 754w, https://images.theconversation.com/files/140602/original/image-20161005-20148-1uqfkh9.jpg?ixlib=rb-1.1.0&amp;q=30&amp;auto=format&amp;w=754&amp;h=503&amp;fit=crop&amp;dpr=2 1508w, https://images.theconversation.com/files/140602/original/image-20161005-20148-1uqfkh9.jpg?ixlib=rb-1.1.0&amp;q=15&amp;auto=format&amp;w=754&amp;h=503&amp;fit=crop&amp;dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The perils of taking selfies?</span>
<span class="attribution"><span class="source">Thomas White/Reuters</span></span>
</figcaption>
</figure>
<h2>What should be done?</h2>
<p>Museums and historic places often have collections that are worth millions. Some contain works of art that are so hard to value that people simply call them “priceless.” </p>
<p>These same institutions, however, <a href="http://press.uchicago.edu/ucp/books/book/chicago/E/bo3684426.html">are often perpetually short on cash</a>. They constantly seek to boost <a href="http://businessmacroeconomics.com/">revenue</a> and cut costs. One method some places have used to achieve these goals is to ban photography of part or all of their collection. The ban is important because for the typical U.S. art museum, the <a href="https://aamd.org/sites/default/files/document/Art%20Museums%20By%20The%20Numbers%202015.pdf">store is an even more important source of revenue</a> than admissions, classes, special exhibition fees and the cafe.</p>
<p>Museums that ban photography are fighting a losing battle since high-quality cameras are getting smaller and more wearable. <a href="http://www.brickhousesecurity.com/category/hidden+cameras/body+worn+cameras.do">Clothes</a> and glasses from companies like <a href="http://www.theverge.com/2016/9/23/13039184/snapchat-spectacles-price-release-date-snap-inc">Snapchat</a> and <a href="https://www.cnet.com/au/news/google-glass-2-0-is-real-photos/">Google</a> mean tiny spy cameras are no longer in the realm of science fiction.</p>
<p>How can some museums generate more revenue and still satisfy our desire to take photographs? One simple model I first saw in the <a href="http://museum.gov.rw/index.php?id=85">Natural History Museum in Rwanda</a> is to charge a photography fee. Patrons can take as many pictures as they want as long as they pay upfront for the privilege.</p>
<p>Another interesting idea is the policy enacted at the <a href="http://www.newportmansions.org/">Newport Mansions</a>, which are summer homes built by the <a href="http://www.ushistory.org/us/36.asp">elite of the Gilded Age</a>. In the mansions, <a href="http://www.newportmansions.org/press/personal-photography">only smartphone cameras</a> are allowed. Larger cameras are banned in an attempt to prevent high-resolution pictures from being taken, which protects gift shop revenue. Unfortunately, with the rapidly improving resolution of smartphone cameras, this policy is only a stopgap.</p>
<p><a href="https://www.guggenheim.org/plan-your-visit#policies">Banning tripods</a>, which people trip over, and selfie sticks, which occasionally hit artwork and other patrons, makes sense. However completely banning photography in an age in which almost everyone has a camera in their phone no longer makes sense. It is time for museums and historic sites to develop more creative policies like a photography fee charged at entry.</p><img src="https://counter.theconversation.com/content/66356/count.gif" alt="The Conversation" width="1" height="1" />
It's easier than ever to visually record our lives thanks to the smartphone and now Snapchat glasses, but many museums and other places are fighting a losing and misguided battle against the trend.Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/653922016-09-13T21:59:39Z2016-09-13T21:59:39ZEager for some good economic news? New census report has you covered<p>Each year in September, the U.S. Census Bureau releases a report showing how income and poverty have changed over time. The <a href="http://www.census.gov/library/publications/2016/demo/p60-256.html">most recent report</a>, which came out on Sept. 13, was filled with great news. </p>
<p>Compared with the previous year, average inflation adjusted income soared 5.2 percent. The U.S. poverty rate fell 1.2 percentage points, resulting in 3.5 million fewer people living in poverty. Even the number of people <a href="http://www.census.gov/content/dam/Census/library/publications/2016/demo/p60-257.pdf">without health insurance fell</a> by 4 million people in the past year.</p>
<p>While these statistics got the headline attention they deserve, there is one piece of great news in the report that hasn’t attracted as much attention but is just as important. The gap between <a href="http://www2.census.gov/programs-surveys/demo/tables/p60/256/table5.xls">women’s and men’s earnings</a> shrank to a new record low. The median woman working a full-time year-round job now earns 80 percent of the median earnings given to men working full-time.</p>
<p>This is great news because as recently as 1981, the average woman in a full-time year-round job was earning less than 60 percent of her male counterpart. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/137656/original/image-20160913-4980-6qyyg3.JPG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img alt="" src="https://images.theconversation.com/files/137656/original/image-20160913-4980-6qyyg3.JPG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" srcset="https://images.theconversation.com/files/137656/original/image-20160913-4980-6qyyg3.JPG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=600&amp;h=356&amp;fit=crop&amp;dpr=1 600w, https://images.theconversation.com/files/137656/original/image-20160913-4980-6qyyg3.JPG?ixlib=rb-1.1.0&amp;q=30&amp;auto=format&amp;w=600&amp;h=356&amp;fit=crop&amp;dpr=2 1200w, https://images.theconversation.com/files/137656/original/image-20160913-4980-6qyyg3.JPG?ixlib=rb-1.1.0&amp;q=15&amp;auto=format&amp;w=600&amp;h=356&amp;fit=crop&amp;dpr=3 1800w, https://images.theconversation.com/files/137656/original/image-20160913-4980-6qyyg3.JPG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;h=447&amp;fit=crop&amp;dpr=1 754w, https://images.theconversation.com/files/137656/original/image-20160913-4980-6qyyg3.JPG?ixlib=rb-1.1.0&amp;q=30&amp;auto=format&amp;w=754&amp;h=447&amp;fit=crop&amp;dpr=2 1508w, https://images.theconversation.com/files/137656/original/image-20160913-4980-6qyyg3.JPG?ixlib=rb-1.1.0&amp;q=15&amp;auto=format&amp;w=754&amp;h=447&amp;fit=crop&amp;dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Ratio of full-time full-year women’s earnings to men’s.</span>
<span class="attribution"><span class="source">U.S. Census Bureau's </span></span>
</figcaption>
</figure>
<p>From 1960 to 1980, there was little change in the ratio of earnings. However, starting in 1980, the <a href="http://www.jstor.org/stable/2117795">ratio of women’s earnings to men’s began to increase</a>. Then in the early 2000s, the pay gap became stuck at 77 percent for a decade. The most recent data suggest the upward trend has resumed.</p>
<p>Parity, where women earn the same as men, is a <a href="https://www.whitehouse.gov/issues/equal-pay">key government goal</a> starting with the <a href="https://www.eeoc.gov/laws/statutes/epa.cfm">Equal Pay Act</a> of 1963. If the trend seen in the graph continues, the U.S. will reach parity in roughly 35 more years.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/n00xZ_mKQgk?wmode=transparent&amp;start=0" frameborder="0" allowfullscreen></iframe>
<figcaption><span class="caption">Batgirl explains the Equal Pay Act.</span></figcaption>
</figure>
<h2>Where are the data from?</h2>
<p>Each year the Census Bureau releases a report on income and poverty in the U.S. These reports are formally known as the <a href="http://www.census.gov/prod/www/population.html#p60">P60 series</a> and are produced as a byproduct of gathering the nation’s <a href="http://www.bls.gov/cps/">monthly unemployment figures</a>. The Census Bureau in conjunction with the Bureau of Labor Statistics interviews about <a href="http://www.census.gov/programs-surveys/cps/technical-documentation/methodology.html">60,000 households</a> each month to determine who is working and who is not.</p>
<p>Once a year in March, <a href="http://www2.census.gov/programs-surveys/cps/techdocs/cpsmar16.pdf">respondents are asked additional questions</a> about their before-tax income and earnings over the past calendar year. There are 18 categories of questions designed to get a full picture of the household’s income. For example, not only does the survey ask about wages, but it also asks about child support payments, social security and even educational assistance.</p>
<p>The questions are fielded in the early spring to correspond with the April 15 <a href="https://www.irs.gov/">IRS tax</a> deadline. People should have their best understanding of their past year’s financial situation just around the time many fill out their tax forms.</p>
<h2>Is there a downside?</h2>
<p>It should be noted, however, that there is a potential downside to the reduction in the <a href="https://www.youtube.com/channel/UCcMxc7kEkx_0HCkI_Dxo7ow">wage gap</a> if women’s gains are coming at the expense of men’s wages. The median earnings for full-time year-round male workers have <a href="http://www.bls.gov/opub/mlr/2015/article/preserving-the-american-dream-in-the-face-of-change.htm">not increased in decades</a> after adjusting for inflation.</p>
<p>Median earnings, the amount given to the person who is exactly halfway between the very best-paid full-time worker and the very worst-paid are better to use than mean figures when comparing income because mean values are skewed by the small number of people with exceptionally high pay. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/137657/original/image-20160913-4948-19kixx7.JPG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img alt="" src="https://images.theconversation.com/files/137657/original/image-20160913-4948-19kixx7.JPG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" srcset="https://images.theconversation.com/files/137657/original/image-20160913-4948-19kixx7.JPG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=600&amp;h=352&amp;fit=crop&amp;dpr=1 600w, https://images.theconversation.com/files/137657/original/image-20160913-4948-19kixx7.JPG?ixlib=rb-1.1.0&amp;q=30&amp;auto=format&amp;w=600&amp;h=352&amp;fit=crop&amp;dpr=2 1200w, https://images.theconversation.com/files/137657/original/image-20160913-4948-19kixx7.JPG?ixlib=rb-1.1.0&amp;q=15&amp;auto=format&amp;w=600&amp;h=352&amp;fit=crop&amp;dpr=3 1800w, https://images.theconversation.com/files/137657/original/image-20160913-4948-19kixx7.JPG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;h=442&amp;fit=crop&amp;dpr=1 754w, https://images.theconversation.com/files/137657/original/image-20160913-4948-19kixx7.JPG?ixlib=rb-1.1.0&amp;q=30&amp;auto=format&amp;w=754&amp;h=442&amp;fit=crop&amp;dpr=2 1508w, https://images.theconversation.com/files/137657/original/image-20160913-4948-19kixx7.JPG?ixlib=rb-1.1.0&amp;q=15&amp;auto=format&amp;w=754&amp;h=442&amp;fit=crop&amp;dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Earnings of full-time full-year male and female workers.</span>
<span class="attribution"><span class="source">U.S. Census Bureau's </span></span>
</figcaption>
</figure>
<p>Women have experienced a steady increase in their median full-time salary over time, growing from about US$23,000 in 1960 to $40,000 per year. Men saw their median earnings increase from about $37,000 per year in 1960 to over $53,000 in 1973. Since 1973, however, <a href="http://link.springer.com/article/10.1057/ces.2012.28">wages for men have stagnated</a>, and the most recent value in 2015 was just $51,200, versus $47,200 for women.</p>
<p>It is hard to <a href="http://www.jstor.org/stable/3132245">determine from these data</a> if the <a href="http://ilr.sagepub.com/content/60/1/45.short">increase of women’s earnings is coming at the expense of men’s</a>. This is because male earnings stagnated in the early 1970s, roughly a decade before the ratio of male to female earnings started changing.</p>
<h2>Road to parity</h2>
<p><a href="http://sw.oxfordjournals.org/content/48/1/22.short">Pay parity</a> is not here yet, even with the help of <a href="https://www.youtube.com/watch?v=n00xZ_mKQgk">commercials featuring Batgirl</a> highlighting the issue of unequal pay for equal <a href="http://businessmacroeconomics.com/">work</a>. However, the latest census report shows the country is on the road to parity and heading in the right direction.</p><img src="https://counter.theconversation.com/content/65392/count.gif" alt="The Conversation" width="1" height="1" />
The report not only reveals soaring incomes and falling poverty, it also confirms the gender pay gap has shrunk to a new record low.Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/635162016-08-04T23:48:45Z2016-08-04T23:48:45ZIf cash is king, how can stores refuse to take your dollars?<figure><img src="https://images.theconversation.com/files/133154/original/image-20160804-501-yzvf27.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=496&amp;fit=clip" /><figcaption><span class="caption">Legal tender no more?</span> <span class="attribution"><span class="source">Legal tender via www.shutterstock.com</span></span></figcaption></figure><p>We’ve been <a href="http://www.emeraldinsight.com/doi/abs/10.1108/09590559510095260">talking about society’s transition to a cashless society</a> for a long time, but it begs an important question: Can stores and other retail establishments refuse to take your dollars and cents? </p>
<p>As odd as it sounds, this is not hypothetical anymore as a small number of stores and industries have stopped accepting cash and allow payment only by credit card, debit card or via a smartphone app.</p>
<p><a href="http://www.sweetgreen.com/menu/?region=new-york">Sweetgreen</a>, a high-end salad restaurant, <a href="http://www.nytimes.com/2016/07/31/business/where-a-suitcase-full-of-cash-wont-buy-you-lunch.html">stopped accepting cash</a> in its New York City stores in <a href="http://www.businessinsider.com/salad-chain-sweetgreen-weighs-cashless-offerings-2016-8">January</a>. A Boston <a href="http://www.falafelshop.com/locations/99-locations-kenmore">restaurant</a> near Fenway Park <a href="http://www.nytimes.com/2016/07/31/business/where-a-suitcase-full-of-cash-wont-buy-you-lunch.html">went cashless</a> this past December. Most <a href="http://articles.latimes.com/2010/jan/24/business/la-fi-lazarus24-2010jan24">airlines stopped taking cash</a> for in-flight purchases of food and beverages around 2010.</p>
<p>While the trend of smaller stores refusing to accept credit cards because of the high fees is more well-established, the opposite trend of refusing to take cash hasn’t been as well-explored. <a href="https://www.youtube.com/watch?v=2vSYg17HD94">Let’s examine why</a> they do it and if they can get away with it.</p>
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<h2>Legal tender?</h2>
<p><a href="http://www.dualtron.ie/cashless-catering/benefits-of-cashless-payment-systems-to-your-company/">Businesses claim that not accepting cash</a> reduces the chance of <a href="http://www.mobilepaymentstoday.com/articles/how-the-uk-can-benefit-from-a-cashless-society/">stores being robbed</a>, eliminates the temptation for employees to <a href="http://www.stepstowardthemark.com/id41.html">steal money</a>, <a href="http://www.rfidjournal.com/articles/view?12137">eliminates the time</a> needed for workers to travel to and from the bank and even reduces expenses by dispensing with the need for bulky cash registers.</p>
<p>Yet eliminating cash is a huge problem for the roughly 10 million U.S. households that <a href="https://www.fdic.gov/householdsurvey/">have no banking accounts</a>. These “unbanked” families have no direct access to financial services like credit and debit cards. For them, it is a hardship not to use cash.</p>
<p>Furthermore, some customers are quite confused by the policy since the front of every piece of U.S. currency states: “This note is legal tender for all debts public and private.” </p>
<p>Moreover, that statement has been enshrined <a href="http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title31-section5103&amp;num=0&amp;edition=prelim#miscellaneous-note">in federal law</a> in various forms since the <a href="http://uscode.house.gov/statviewer.htm?volume=rs&amp;page=708">late 1800s</a>.</p>
<p>So the question is, why don’t the statements on each piece of currency and the various federal laws backing that up mean that a restaurant, shop or airline has to accept paper money?</p>
<h2>When does a Coke become a debt?</h2>
<p>The answer might surprise you. </p>
<p>Stores don’t have to accept paper money. Despite the greenback’s apparent claim, the right for a store to refuse cash is supported both by the <a href="https://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx">U.S. Treasury</a> and the <a href="https://www.federalreserve.gov/faqs/currency_12772.htm">Federal Reserve</a>.</p>
<p>There are <a href="http://businessmacroeconomics.com/">two reasons</a> that a business can reject cash even if it is “legal tender for all debts public and private.” </p>
<p>First, this statement means that the only circumstance when someone must accept the bill is <a href="http://www.azlawhelp.org/viewquestions.cfm?mc=4&amp;qid=231&amp;sc=34">when a person owes the business a debt</a>. If no debt has been incurred, a person or business is not legally required to take U.S. currency.</p>
<p>Let us say it is very late at night and you need gasoline for your car. Many gas stations in the U.S. do not take large bills late at night to prevent robberies and theft. If the gas station requires customers to pay for gas before pumping it into their car, they have the legal right to refuse US$50 and $100 bills. They do not have to accept large bills because until the customer has put gas into the car, the customer does not owe the station owner anything. However, if the customer is allowed to pump gasoline into the car first and then pay, the owner must accept all types of U.S. bills because the customer has a debt to pay.</p>
<p>The same issue <a href="https://consumerist.com/2013/02/25/court-rules-airline-doesnt-need-to-accept-cash-for-in-flight-purchases/">arises on an airplane</a>. If you want to buy a drink for $5, the airline doesn’t have to accept your cash as long as it requires you to pay for the drink first. Until you have drunk your beverage, you owe no debt to the airline.</p>
<h2>There oughta be a law</h2>
<p>The second reason is that while the statement on each piece of currency is enshrined in federal law, there’s no actual federal statute that requires companies to accept it. </p>
<p>As the <a href="https://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx">U.S. Treasury points out</a>:</p>
<blockquote>
<p>“There is, however, no federal statute mandating that a private business, a person or an organization must accept currency or coins as payment for goods or services. Private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise.”</p>
</blockquote>
<p>Massachusetts is one state that actually does have a <a href="https://malegislature.gov/Laws/GeneralLaws/PartIII/TitleIV/Chapter255D/Section10A">law on the books</a> that requires all retail establishments to accept cash payments. However, at the present moment this law appears <a href="http://www.bostonglobe.com/business/2016/08/03/paying-cash-some-stores-say-thanks-greenbacks-credit-only/a4EvjwgTpI7r4lD3xVOENO/story.html">relatively unknown</a>, the exact definition of a retail establishment is unclear, but most importantly the law specifies no penalties for breaking the law.</p>
<p>Airlines taking off from Boston’s airport clearly are not retail establishments, but do <a href="http://en.parkopedia.com/parking/lot/37_ashburton_pl/02108/boston/">parking garages in Boston that take only credit cards</a> fall into the retail category?</p>
<p>The <a href="https://www.bostonfed.org/payment-studies-and-strategies/payments-in-perspective/measuring-how-consumers-pay.aspx">Survey of Consumer Payment Choice</a>, an annual survey by the Boston Federal Reserve, shows that paying bills by cash is still very popular. In 2013, the <a href="https://www.bostonfed.org/publications/research-data-report/2015/the-2013-survey-of-consumer-payment-choice-summary-results.aspx">latest year of data</a>, roughly one-quarter of all payments made by individuals were still done by cash. However, the larger the payment, the lower the chance cash was involved.</p>
<p>What does all this mean? Cash might not be king anymore, especially for large debts. </p>
<p>However, cash is not dead or dying, even if some <a href="https://www.youtube.com/channel/UCcMxc7kEkx_0HCkI_Dxo7ow">businesses</a> wish that paper money would disappear.</p><img src="https://counter.theconversation.com/content/63516/count.gif" alt="The Conversation" width="1" height="1" />
<h4 class="double-bordered">Disclosure</h4><p class="fine-print"><em><span>Jay L. Zagorsky is an unpaid advisor to the Federal Reserve&#39;s Survey of Consumer Payment Choice.</span></em></p>The notes in your pocket say they're legal tender for all debts public and private. Are they lying?Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/624032016-07-14T03:29:38Z2016-07-14T03:29:38ZWill Cleveland get an economic boost from Trump’s GOP coronation?<p>The Republican National Convention is coming to Cleveland, and <a href="http://www.rethinkcleveland.org/Media-Center/News/Cleveland-Rocks-the-GOP-Convention-Contest.aspx">boosters</a> are cheering the <a href="https://www.2016cle.com/rnc-by-the-numbers">millions of dollars</a> it will bring to northeast Ohio’s businesses.</p>
<p>There are lots of impact studies of previous Republican and Democratic nominating conventions. Each seems to produce more eye-popping figures than the last. However, some <a href="http://www.jstor.org/stable/40326166">academics</a> and <a href="http://blogs.wsj.com/numbers/the-economic-oomph-from-big-events-1159/">journalists</a> suggest these conventions really have no impact on the local economy. </p>
<p>Which is the true story?</p>
<h2>The official impact</h2>
<p>The host committee in Cleveland for 2016 <a href="https://www.2016cle.com/rnc-by-the-numbers">estimates the current convention</a> will result in 50,000 visitors who will spend a total of US$200 million. </p>
<p>They base this figure on the official analysis of the last Republican convention, which was held in Tampa Bay in 2012. Organizers claimed this convention had a <a href="http://www.tampagov.net/sites/default/files/public-affairs/files/20130820_RNCEconomicImpactReport_Kench.pdf">total economic impact</a> of over $400 million. This was more than double the almost <a href="http://www.saintpaulfoundation.org/_asset/jh9x9t/news_09022009_convention-impact-report.pdf">$170 million</a> estimated as the official impact of the previous 2008 convention in Minneapolis-Saint Paul. The Tampa Bay convention estimates are high because roughly half the spending was for infrastructure improvements that were not needed for the other conventions.</p>
<p>It is not just Republican conventions that produce huge figures. Democratic conventions are reputed to have just as big an influence, if not more. The hoopla surrounding the upcoming 2016 Democratic convention in Philadelphia claims it will bring in <a href="http://www1.villanova.edu/content/dam/villanova/VSB/publications/David%20Fiorenza%20DNC%20Report%202016_final.pdf">$350 million</a>, which leaves Cleveland’s $200 million figure looking almost paltry.</p>
<p>Official post-mortems of the 2012 Democratic convention in Charlotte stated this event <a href="http://charmeck.org/city/charlotte/Newsroom/newsarchive/Documents/DNC%20Economic%20Impact%20Study%20Fact%20Sheet%20Final.pdf">injected $164 million</a> into the local economy, while the 2008 convention in Denver, Colorado, officially resulted in a <a href="https://www.gwu.edu/%7Eaction/2008/chrnconv08/denverimpact.pdf">$266 million windfall</a>.</p>
<p>Together the six nominating conventions held from 2008 to 2016 appear to have generated a whopping $1.5 billion for their host cities.</p>
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<h2>Is there really an impact?</h2>
<p>There is reason, however, to suspect the benefits of political conventions are overstated, especially since the “official” post-mortems are paid for by the organizers. </p>
<p>Research by economists <a href="http://www.jstor.org/stable/40326166">Robert Baade, Robert Baumann and Victor Matheson</a>, which looked at the impact of every convention held from 1970 to 2004, found no discernible impact. Research done by <a href="http://www.sciencedirect.com/science/article/pii/S0261517712000568">Brian Mills and Mark Rosentraub</a> at the University of Michigan points out four reasons why the large impacts touted by convention organizers are actually exaggerated.</p>
<p>First, visitors and <a href="https://nextcity.org/daily/entry/cleveland-2016-republican-convention-crowds-transit">locals that normally come</a> to the city during the convention are displaced by delegates, offsetting the positive impact. Conventions result in <a href="https://www.2016cle.com/press-releases/security-and-traffic-restrictions">street closures and detours</a> to ensure security. </p>
<p>In addition, many conventions are marred by protests. The <a href="http://www.history.com/this-day-in-history/protests-at-democratic-national-convention-in-chicago">Democratic convention in Chicago during 1968</a> was the scene of large riots. These cause people to want to stay away. In 2004, I lived quite close to the Democratic convention. To avoid the chaos, my family and I left on vacation until the craziness was over. When locals and other visitors avoid a city because of a convention, spending is lost.</p>
<p>Second, boosters report the total spending by visitors. However, the local impact is much less since a large part of that spending is based on items imported from outside the local area. For example, if a delegate in Cleveland goes into a restaurant and orders $50 of steak and wine, that entire amount goes into the impact statement. However, Cleveland has no cattle ranches and only one <a href="http://chateauhough.org/">tiny winery</a>. If the steak the delegate eats was imported from Chicago and the wine being drunk comes from California, the true local impact is $50 minus the cost of the beef and alcohol.</p>
<p>Third, convention organizers often claim that they boost local employment temporarily. Some of that temporary employment, however, is by workers who come from <a href="http://www.nydailynews.com/archives/news/sex-pros-ready-party-article-1.629624">outside the region</a> and whose spending and pay will go back outside the region once the convention ends. For example, media specialists, high-level political operatives and even extra waiters who don’t live in Cleveland, but are brought in for the convention, are counted in the total event’s expenditure. However, these people will be paid after the convention is over and typically use this pay elsewhere.</p>
<p>Fourth, spending by locals who don’t flee during the convention is often included in the boosters’ figures. For example, conventions bring in lots of local volunteers. Cleveland is hoping for <a href="http://www.cleveland.com/rnc-2016/index.ssf/2016/05/republican_national_convention_3.html">8,000 people to help out for free</a>. These volunteers buy lunches, take taxis and spend money, all of which is counted by the boosters. Much of this money, however, would likely been spent anyway in the local economy.</p>
<p>A fifth point, not on <a href="http://www.sciencedirect.com/science/article/pii/S0261517712000568">Mills and Rosentraub</a>’s list, is that the boosters ignore the effects of taxes in their calculations. These taxes significantly reduce the convention’s overall benefit. For example, let’s assume organizers highlight that income in the local area rose by an extra $100 million. They are overlooking the fact that both the federal and state government will take a share of that new money away in taxes.</p>
<h2>Can we see an impact?</h2>
<p>One method of determining which side is correct is to look at official sales figures collected by tax officials. </p>
<p>Hotels, restaurants, florists, caterers and transportation companies are all required to tell state officials exactly how much they sold. This facilitates tax collection. The last Republican convention held in Tampa Bay provides a straightforward method of checking the economic impact since the state of Florida maintains a <a href="http://dor.myflorida.com/taxes/Pages/colls_from_7_2003.aspx">website</a> that shows monthly sales by category and county.</p>
<p>The below graph shows total monthly sales in <a href="http://geology.com/county-map/florida.shtml">Hillsborough and Pinellas</a> counties, which are the two areas comprising Tampa Bay. The graph is centered on August 2012, the date of the last Republican convention, which boosters claimed brought in over $400 million. Visually, however, Florida’s Department of Revenue shows no boost in actual spending.</p>
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<h2>Why do cities fight to hold a convention?</h2>
<p>If there is no <a href="http://businessmacroeconomics.com/">economic benefit</a>, why do cities fight each other to hold conventions? </p>
<p>In my mind the answer is simple. While there is no overall impact, select groups clearly profit. Local municipal employees, like the police, rack up tremendous amounts of overtime. <a href="http://www.cleveland.com/metro/index.ssf/2016/05/arbitrator_says_cleveland_cant.html">Cleveland’s 150 most senior police officers</a> will all be paid time and a half during the week of the convention. Local politicians are feted on national television, which boosts their political profile and increases their chances for reelection, if all goes smoothly.</p>
<p>In addition to benefiting specific groups, there is a clear publicity advantage. Convention news coverage focuses on more than just the political speeches. The key <a href="https://www.2016cle.com/things-to-do/more-things-to-do/25-free-things-to-do-in-cle">tourist attractions</a>, <a href="https://youtu.be/KpkXL70G6kM">regional specialties</a> and local facilities are highlighted for television viewers, which can increase tourism in the long run.</p>
<p>Overall, I believe there is a benefit for holding a convention, but it is not the financial benefit coming from large numbers of visitors renting hotel rooms, eating in restaurants, drinking in bars and enjoying other forms of <a href="http://abcnews.go.com/Blotter/story?id=5629167">entertainment</a>. Instead, what this year’s organizers will get is a brief period of time when the eyes of the world are focused on Cleveland. Good luck, Cleveland, during your moment in the spotlight.</p><img src="https://counter.theconversation.com/content/62403/count.gif" alt="The Conversation" width="1" height="1" />
Republicans and Democrats alike claim their conventions provide a big economic boost to their host cities. What's the evidence say?Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/611472016-06-20T10:01:07Z2016-06-20T10:01:07ZBrexit backers claim U.K. is drowning in EU regulations – are Americans underwater too?<figure><img src="https://images.theconversation.com/files/126962/original/image-20160616-15086-gr381o.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=496&amp;fit=clip" /><figcaption><span class="caption">Code of Federal Regulations, all 175,000 pages.</span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Code_of_Federal_Regulations.jpg">Wikimedia</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>On June 23, the United Kingdom will decide whether to <a href="http://www.telegraph.co.uk/news/2016/06/15/former-tory-leaders-and-chancellors-accuse-george-osborne-of-lud/">leave</a> the European Union or <a href="http://www.thetimes.co.uk/edition/eu-referendum/we-are-stronger-staying-in-and-we-risk-it-all-if-we-vote-to-leave-0p6r9rbjl">stay</a>. The vote is nicknamed Brexit, short for British Exiting. One reason the debate is important outside of the U.K. is that it is partly a referendum over the amount of government regulation voters want.</p>
<p>Many people wishing to leave cite concerns about the EU imposing unfair, onerous and growing amounts of regulations. <a href="https://www.facebook.com/borisjohnson/">Boris Johnson</a>, the ex-mayor of London, has become a chief spokesman for leaving. He <a href="http://www.conservativehome.com/parliament/2016/05/boris-johnsons-speech-on-the-eu-referendum-full-text.html">argues</a> remaining in the union subjects British businesses to thousands of costly new EU regulations each year. However, the “stay” and “leave” sides <a href="http://www.telegraph.co.uk/news/2016/04/28/eu-referendum-fact-checking-the-big-claims/">do not agree</a> on the specific <a href="http://www.economist.com/blogs/graphicdetail/2016/02/graphics-britain-s-referendum-eu-membership">number and costs</a>.</p>
<p>That got me thinking: Is “overregulation” becoming a problem in the U.S.? What’s regulation’s real cost to business, both in terms of money and innovation? How important is regulatory reform, and is it hopeless, as <a href="http://www.brookings.edu/blogs/fixgov/posts/2015/05/28-is-regulatory-reform-hopeless-kosar">some commentators claim</a>?</p>
<h2>The U.S’. regulation problem</h2>
<p>A rapid growth in regulations is not occurring just in Europe. It is also happening in the U.S. </p>
<p>Below is a graph of the <a href="https://regulatorystudies.columbian.gwu.edu/reg-stats">number of pages published</a> in the U.S. <a href="https://www.gpo.gov/fdsys/browse/collectionCfr.action?collectionCode=CFR&amp;searchPath=Title+6&amp;oldPath=&amp;isCollapsed=true&amp;selectedYearFrom=2004&amp;ycord=0">Code of Federal Regulations</a>, or CFR. The CFR is the compilation of the administrative rules enforced by the federal government.</p>
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<p>The page count is not a perfect measure of regulation for two reasons. First, it excludes state and local rules. Second, some rules and regulations need more words than others. Nevertheless, it is currently the best approximation available and is monitored both by <a href="https://www.federalregister.gov/uploads/2015/05/Code-of-Federal-Regulations-Total-Pages-and-Volumes-1938-2014.pdf">Congress</a> and <a href="https://cei.org/blog/new-data-code-federal-regulations-expanding-faster-pace-under-obama">many</a> <a href="http://spectator.org/55475_twenty-years-non-stop-regulation/">outsiders</a>.</p>
<p>The graph shows that the U.S. has experienced a dramatic growth in regulation, with the amount of pages increasing by a factor of nine since the 1950s. It also shows that neither Republicans or Democrats are immune to the charge that they are imposing more rules and regulations. There is a steady march upward regardless of which party occupies the White House. </p>
<p>Many presidents, <a href="http://www.cato.org/sites/cato.org/files/serials/files/regulation/1991/1/reg20n1a.html">starting with</a> Richard Nixon and continuing through <a href="https://www.whitehouse.gov/sites/default/files/docs/microsites/omb/eo_13610_identifying_and_reducing_regulatory_burdens.pdf">Barack Obama</a>, have tried to reduce the number of regulations or their burden. One attempt was the 1995 <a href="https://www.whitehouse.gov/sites/default/files/omb/assets/OMB/inforeg/5_cfr_1320.pdf">Paperwork Reduction Act</a>. This act had a small success, with about 6,000 CFR pages <a href="http://pubs.acs.org/doi/abs/10.1021/es00009a726?journalCode=esthag">cut</a> – about four percent of the total at the time, from 1995 to 1996. Nevertheless, reductions are relatively infrequent. Since 1950, the number of pages has grown on average by five percent a year.</p>
<h2>Why do we have regulations?</h2>
<p>Given the growing volume of regulations, it’s reasonable to ask whether we even need them. The easy answer appears to be yes: Regulations are important in modern life. </p>
<p>Society is complex and every country needs rules to help govern and ensure order. Moreover, power is not shared equally in modern society. Regulations have the ability to protect the weak and powerless by requiring all to follow the same set of rules. For example, very large companies cannot use their power to pollute the land and water without running afoul of regulations throughout the world.</p>
<p>There is clearly a need for rules and regulations. However, the Brexit debate points out that many people in Briton feel overregulated, which is when the costs and burdens imposed by regulations outweigh their benefits.</p>
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<h2>Regulatory costs</h2>
<p>Overregulating society increases the cost of companies to do <a href="http://businessmacroeconomics.com/">business</a> because <a href="https://mises.org/library/government-regulation-another-hidden-tax">such rules act as a hidden tax</a>. These extra costs are often passed on to customers.</p>
<p>The <a href="https://www.whitehouse.gov/omb/inforeg_regpol_reports_congress/">costs of major U.S. regulations</a> are annually complied by the White House and submitted to Congress. The values in these reports are not independent estimates. Instead, they are based on the calculations done by the agency that issues the rules. The most recent reports all look similar and show regulation provides between US$4 and $10 of benefits for every dollar of costs. However, the <a href="https://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/costbenefitreport.pdf">2001 report</a> broke from the mold and stated “the total cost of regulation is nearly equal to the $584 billion Congress appropriated for all discretionary programs in FY 2000.”</p>
<p>Elsewhere in the world, the costs of regulations can be even higher. The World Bank <a href="http://www.doingbusiness.org/data/exploretopics/starting-a-business">ranks countries</a> on various measures of starting a new business, such as the cost of regulations and time it takes to begin operating. In 10 countries (mostly in Africa), the average cost to start a business is equivalent to at least 100 percent of national income per capita, compared with just 3.2 percent in OECD countries. </p>
<p>The time it takes to comply with regulations can also differ dramatically, ranging from just half a day for the fastest country (New Zealand) to 144 days for the slowest (Venezuela).</p>
<h2>Do regulations hurt innovation?</h2>
<p>Researchers have still not clearly determined if regulations help or hurt innovation. </p>
<p>Regulations clearly prevent some activities from happening. For example, a recent <a href="http://www.wsj.com/articles/drop-the-supersonic-aircraft-ban-watch-business-boom-1465769638">Wall Street Journal article</a> argued FAA regulations on supersonic aircraft noise over land has prevented a new class of small quiet planes, which could travel from L.A. to New York in 90 minutes, from developing.</p>
<p>However, <a href="http://www.itif.org/files/2011-impact-regulation-innovation.pdf">regulations potentially spur innovation</a> as competing companies search for improved ways to do business. The <a href="http://www.scientificamerican.com/article/essay-1991-04/">Porter Hypothesis</a> suggests environmental regulations might enhance competitiveness by forcing companies to view pollution as costly waste. When regulations put a price on pollution, companies innovate to reduce this waste. This makes the company more efficient and society better off. </p>
<p>Whether or not the <a href="http://www.rff.org/files/sharepoint/WorkImages/Download/RFF-DP-11-01.pdf">Porter Hypothesis happens</a> with environmental laws, it is clear government regulation of taxi companies has spurred dramatic innovation in transportation by ride sharing companies like Uber and Lyft.</p>
<h2>The importance of regulatory reform</h2>
<p>Concerns about overregulation will remain, no matter what British voters decide on June 23. Regulations are needed in modern society, but simplifying rules and eliminating outdated regulations would address many concerns highlighted in the Brexit debate.</p>
<p>Simplification is important because reading and <a href="http://www.sciencedirect.com/science/article/pii/0047272783900658">understanding regulations</a> is often exceptionally difficult even for people who are <a href="http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2730786/">experts</a>. Many large organizations now hire <a href="http://www.chief-compliance-officer.org/">chief compliance officers</a>, who are individuals devoted to ensuring the company does not run afoul of regulations.</p>
<p>Even the U.S. government recognizes simplification is needed. It has a <a href="http://www.plainlanguage.gov/index.cfm">Plain Language Initiative</a> encouraging government agencies to write future rules, regulations and documents in simple words. This initiative, however, only deals with new work and has no penalty for noncompliance.</p>
<p>It is impossible to expect people to follow rules they don’t understand. This means all regulations must be clear to people with average knowledge and intelligence. I shudder to think how key rules like the <a href="http://lifehopeandtruth.com/bible/10-commandments/the-ten-commandments/10-commandments-list/">Ten Commandments</a> would be written or be followed if they were composed in regulatory language.</p>
<p>Provisions must also be made for eliminating out-of-date rules. Governments create rules and regulations but typically don’t eliminate them when the concern addressed is no longer relevant. This issue was recognized by the U.S.‘ founding fathers. In a letter <a href="http://press-pubs.uchicago.edu/founders/documents/v1ch2s23.html">Thomas Jefferson wrote</a> to James Madison, he actually suggested 19 years should be the maximum length of time for any law.</p>
<p>There are many examples of regulations in the CFR that are ready for retirement. For example, a <a href="https://www.gpo.gov/fdsys/pkg/USCODE-2011-title15/html/USCODE-2011-title15-chap29.htm">statute regulating switchblade knives</a> was passed a year after “West Side Story” appeared on Broadway. The play and subsequent movie contain a violent scene in which a gang member stabs a rival with a switchblade.</p>
<p>The prohibition <a href="http://indefinitelywild.gizmodo.com/why-switchblades-are-banned-1704050416">against the manufacture and sale of switchblades</a> is quaint in today’s society, in which worries about violence are focused on guns, and <a href="https://www.amazon.com/s/ref=sr_nr_n_0?fst=as%3Aoff&amp;rh=n%3A3375251%2Cn%3A3222119011%2Ck%3Atactical+knife&amp;keywords=tactical+knife&amp;ie=UTF8&amp;qid=1466013989&amp;rnid=3375301">tactical knives</a> have their own Amazon shopping category, available for immediate delivery. </p>
<p>In my view, one simple method of improving the problems is to set a fixed limit to the number of pages of regulations. The U.S. CFR is currently over 175,000 pages. Setting a hard limit at 175,000 pages would force government agencies thinking about making new regulations to either eliminate or simplify older regulations to make space for new rules.</p>
<p>Politicians in the past have campaigned on platforms of not raising taxes and balancing budgets. A platform of fixing the number of pages of regulations might be just the ticket for stemming the anger about overregulation that has fueled the desire of many Britons to leave the EU.</p><img src="https://counter.theconversation.com/content/61147/count.gif" alt="The Conversation" width="1" height="1" />
Too much regulation from Brussels has been a rallying cry for Britons who want to opt out of the EU. Is 'overregulation' a problem in the U.S. too?Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/603012016-06-02T01:00:55Z2016-06-02T01:00:55ZWhy are fewer people getting married?<figure><img src="https://images.theconversation.com/files/124871/original/image-20160601-2812-cyhr37.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=496&amp;fit=clip" /><figcaption><span class="caption">Maybe we should just live together...</span> <span class="attribution"><span class="source">Rejected proposal via www.shutterstock.com</span></span></figcaption></figure><p>June kicks off the <a href="http://www.huffingtonpost.com/news/wedding-season/">U.S. wedding season</a>. Whether you love nuptials or hate them, an astounding trend is occuring: fewer couples are tying the knot.</p>
<p>The number of U.S. marriage ceremonies <a href="http://www2.census.gov/library/publications/2004/compendia/statab/124ed/tables/vitstat.pdf">peaked in the early 1980s</a>, when almost 2.5 million marriages were recorded each year. Since then, however, the total number of people getting married has fallen steadily. Now only about <a href="http://www.cdc.gov/nchs/nvss/marriage_divorce_tables.htm">two million marriages</a> happen a year, a drop of almost half a million from their peak. </p>
<p>As a result, <a href="http://www.census.gov/hhes/families/data/adults.html">barely more than half</a> of adults in the U.S. say they’re living with a spouse. It is the lowest share on record, and down from 70 percent in 1967. </p>
<p>What’s behind this trend? Is marriage becoming obsolete? Why should we care? </p>
<h2>Marriage rates are dropping too</h2>
<p>The drop in marriages is even more dramatic when the rapid growth in the U.S. population is taken into account. In fact, the marriage rate is the lowest in at least 150 years.</p>
<p>The figure below shows the <a href="http://www.cdc.gov/nchs/data/series/sr_21/sr21_024.pdf">number of marriages per 1,000 people for the last century</a> and a <a href="http://www2.census.gov/library/publications/2004/compendia/statab/124ed/tables/vitstat.pdf">half</a>. It does not matter if it is a person’s first, second or even third marriage. The rate simply tracks the number of weddings that occurred adjusted by the population.</p>
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<p>In the late 1800s, about nine out of every 1,000 people got married each year. After rising in the early 1900s through World War I, the marriage rate plummeted during the Great Depression, when fewer people were able to afford starting a family. The rate shot up again at the end of World War II as servicemen returned home, eager to get hitched and have babies.</p>
<p>But since the early 1980s, the marriage rate has steadily dropped until it leveled off in 2009 at about seven per 1,000. </p>
<h2>A global trend</h2>
<p>It’s not just the U.S. where this is happening. </p>
<p>The <a href="http://www.un.org/esa/population/publications/WMD2008/WP_WMD_2008/Data.html">United Nations gathered data</a> for roughly 100 countries, showing how marriage rates changed from 1970 to 2005. Marriage rates fell in four-fifths of them.</p>
<p>Australia’s marriage rate, for example, fell from 9.3 marriages per 1,000 people in 1970 to 5.6 in 2005. Egypt’s declined from 9.3 to 7.2. In Poland, it dropped from 8.6 to 6.5.</p>
<p>The drop occurred in all types of countries, poor and rich. And it clearly wasn’t based on geography, since one of the biggest declines occurred in Cuba (13.4 to 5), while one of the biggest increases occurred in the neighboring island of Jamaica (4.9 to 8.7).</p>
<p>Among countries that experienced a reduction, the average rate fell from 8.2 marriages per 1,000 to just 5.2, which is an even lower rate than what the U.S. is now experiencing. </p>
<h2>Why has the drop occurred?</h2>
<p>The <a href="http://www.businessinsider.com/causes-of-low-marriage-rates-2014-5">range of culprits</a> is quite large. </p>
<p>Some blame widening U.S. <a href="http://www.sciencedirect.com/science/article/pii/S0094119002005181">income and wealth inequality</a>. Others point the finger at the fall in <a href="https://www.commonwealmagazine.org/decline-catholic-marriages">religious adherence</a> or cite the increase <a href="https://www.russellsage.org/publications/decline-marriage-among-african-americans">in education</a> and <a href="http://link.springer.com/article/10.2307/2060761">income of women</a>, making women choosier about whom to marry. Still others focus on <a href="http://link.springer.com/article/10.1007/s13524-014-0333-6">rising student debt</a> and rising housing costs, forcing people to put off marriage. Finally some believe marriage is simply an <a href="http://national.deseretnews.com/article/15240/most-americans-think-their-own-marriage-is-better-than-others-deseret-news-byu-survey-finds.html">old, outdated tradition</a> that is no longer necessary.</p>
<p>But given that this is a trend happening across the globe in a wide variety of countries with very different income, religious adherence, education and social factors, it’s hard to pin the blame on just a single culprit.</p>
<h2>Don’t blame the government</h2>
<p>Moreover, this drop in marriages is not occurring because of adverse legal or public policy changes. Governments across the globe continue to provide incentives and legal protections that encourage marriage.</p>
<p>For example, the U.S. federal government has <a href="http://www.gao.gov/new.items/d04353r.pdf">over 1,000 laws</a> that make special adjustments based on marital status. Many of these adjustments allow married couples to <a href="http://www.bankrate.com/finance/money-guides/how-marriage-impacts-your-taxes-1.aspx">get preferential tax treatment</a> and <a href="http://money.usnews.com/money/retirement/articles/2014/03/10/how-marital-status-affects-retirement-benefits">more retirement benefits</a>, and bypass <a href="http://www.telegraph.co.uk/finance/personalfinance/tax/10745009/The-desperate-tactics-being-used-to-avoid-inheritance-tax.html">inheritance laws</a>.</p>
<p>Moreover, government legalization of <a href="http://www.bbc.com/news/world-us-canada-33290341">same-sex marriages</a> around the <a href="http://www.pewforum.org/2015/06/26/gay-marriage-around-the-world-2013/">world</a> has boosted the number of individuals able to enter into legally sanctioned unions. </p>
<p>While legalizing same-sex marriages has <a href="https://www.washingtonpost.com/news/the-fix/wp/2015/04/28/heres-how-many-gay-marriages-the-supreme-court-could-make-way-for/">boosted the number of marriages</a>, this increase has not been enough to reverse the declining trend.</p>
<h2>Is it a switch to cohabiting?</h2>
<p><a href="http://www.jstor.org/stable/352997">Another popular explanation</a> for why fewer people are getting married is that <a href="http://www.cdc.gov/nchs/data/nhsr/nhsr092.pdf">more couples prefer to live together</a> informally, known as cohabitation. </p>
<p>It is true that the <a href="http://www.nbcnews.com/health/new-normal-cohabitation-rise-study-finds-1C9208429">percentage of people living with a partner</a> instead of marrying has risen over time. In 1970 just half-of-one-percent of all adults were cohabiting in the U.S. Today the figure is 7.5 percent.</p>
<p>However, this trend fails to explain the whole story of falling marriage rates. Even when we combine the share of adults who are married with those who are cohabiting, <a href="http://www.census.gov/hhes/families/data/adults.html">the picture still reveals</a> a strong downward trend. In the late 1960s, over 70 percent of all U.S. adults were either married or cohabiting. The most recent data show less than 60 percent of adults are living together in either a marriage or cohabiting relationship.</p>
<p>This means over time, a smaller percentage of people are living as a couple. The number of people living alone, without a spouse, partner, children or roommates has almost doubled. The number of people living by themselves in the U.S. was less than 8 percent in the late 1960s. Today’s it’s almost 15 percent.</p>
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<h2>Costs and benefits of marriage</h2>
<p>So why have marriage rates declined <a href="http://www.un.org/en/development/desa/population/publications/pdf/popfacts/PopFacts_2011-1.pdf">around the world</a>, while the number of people living on their own has exploded? In my mind, the <a href="http://businessmacroeconomics.com/">simple answer</a> is that for more people, the current costs of marriage outweigh the benefits. </p>
<p>The <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=500887">benefits of marriage</a> are numerous and well-known. Researchers have linked marriage to better outcomes for children, less crime, an <a href="http://gerontologist.oxfordjournals.org/content/38/5/618.short">increase in longevity</a> and happier lives, among many factors. My own research revealed that <a href="http://jos.sagepub.com/content/41/4/406.short">marriage is associated with more wealth</a>.</p>
<p>Nevertheless, as <a href="http://www.journals.uchicago.edu/doi/abs/10.1086/260084">Gary Becker</a> pointed out in his widely used theory of marriage, these benefits don’t come for free. Marriage is hard work. Living with someone means taking into account another person’s feelings, moods, needs and desires instead of focusing just on your own. This extra work has large time, emotional and financial costs.</p>
<p>While decades ago many people believed the benefits of marriage outweighed these costs, the data around the world are clearly showing that more people are viewing the benefits of being married, or even cohabiting, as much smaller than the costs.</p>
<h2>Why do we care?</h2>
<p>As the wedding season takes hold, I have already been invited to a few nuptials, so it is clear marriage is not actually becoming obsolete.</p>
<p>Society today is geared toward couples. However, if the trends continue, then the growing number of single people will presumably begin to exert political pressure to eliminate the laws that favor and reward marriage and implicitly discriminate against them. </p>
<p>The question is: how large will this policy shift be and how soon until it occurs?</p><img src="https://counter.theconversation.com/content/60301/count.gif" alt="The Conversation" width="1" height="1" />
Marriage rates have been falling for decades and are now at their lowest in at least 150 years. What's wrong with getting hitched?Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/593632016-05-13T10:02:52Z2016-05-13T10:02:52ZWhat is Brazilian President Dilma Rousseff's real crime?<p>Dilma Rousseff, Brazil’s first female president, is <a href="http://www.nytimes.com/2016/05/13/world/americas/dilma-rousseff-brazil-impeachment.html">about to go on trial</a>. She is temporarily suspended from office while Brazilian politicians debate whether she broke the country’s laws.</p>
<p>Her crime is she <a href="http://www.nytimes.com/2016/04/20/world/americas/dilma-rousseff-impeachment-brazil.html">allegedly borrowed</a> about US$11 billion from Brazil’s state banks – about one percent of GDP – to fund long-running social programs for small farmers and the poor while trying to get reelected, which concealed a budget deficit.</p>
<p>The impeachment hearings come amid a <a href="http://www.huffingtonpost.com/entry/brazil-corruption-scandal_us_56fbf5dae4b083f5c6063e80">wide-ranging corruption scandal</a> and an economy that is in tatters. Rousseff is <a href="http://www.cnn.com/2016/05/12/americas/brazil-rousseff-impeachment-vote/index.html">calling it a coup</a> and urging her supporters to march in the streets. </p>
<p>So why is it a crime for the Brazilian president to borrow money from one part of the government – state-owned banks – in order to allow the executive branch to spend more? The answer lies in Brazil’s history of debt and hyperinflation. </p>
<h2>Brazil’s debt problem</h2>
<p><a href="http://english.tse.jus.br/arquivos/federal-constitution">Brazil’s constitution</a> expressly forbids spending money that has not been allocated in the budget and also forbids the government from borrowing money without prior authorization. </p>
<p>Other countries have similar clauses. The <a href="http://www.senate.gov/civics/constitution_item/constitution.htm#a1_sec8">U.S. Constitution</a>, for example, gives only Congress, not the president, the power to borrow money, and the amount that can be borrowed is subject to a <a href="https://www.treasury.gov/initiatives/Pages/debtlimit.aspx">debt ceiling</a> (which isn’t in the Constitution). But beyond that, the document sets no specific limits. </p>
<p>So why does a country like Brazil enshrine in its constitution such strict limits on borrowing and spending? The simple reason is that Brazil has had a very troubled financial history. Past governments have borrowed too much and then been unable to pay off the country’s debts. </p>
<p>Since 1824, <a href="http://www.nber.org/papers/w9908.pdf">Brazil has defaulted</a> on its debts seven times. In roughly one-quarter of all years since 1824, the Brazilian government was either in default or working on restructuring its loans. If Brazil were a person who lived for two centuries, she would have spent about one out of every four years of her life dealing with upset creditors, bill collectors and bankers!</p>
<p>When a country defaults on its debt, it is often shut out of international credit markets. This means that the defaulting country is not able to borrow money. </p>
<p>Argentina, Brazil’s neighbor, last defaulted on its debt in 2001. <a href="http://www.wsj.com/articles/argentina-returns-to-global-debt-markets-with-16-5-billion-bond-sale-1461078033">Argentina was shut out</a> of borrowing from international credit markets for 15 years while dealing with bondholders. It was only able to borrow again starting this past April.</p>
<h2>Covering a shortfall</h2>
<p>Of course, many governments spend more than they take in as revenue. If a government has this kind of shortfall, there are primarily <a href="http://businessmacroeconomics.com/">four methods of handling</a> the situation. </p>
<p>First, the government can cut back on spending so that the books become balanced. Rousseff did reduce government spending after becoming Brazil’s president, but this occurred well after the alleged borrowing. A second way is to increase taxes, fees and licenses so that the government brings in more revenue. This is harder to do because it’s naturally not very popular with voters.</p>
<p>A third way of handling a budgetary shortfall is to borrow money either from locals or people outside the country. This is what Rousseff allegedly did. </p>
<p>Throughout history numerous governments have wanted to spend more money than they take in but for one reason or another were not able to effectively tax their citizens, cut back on spending or borrow money.</p>
<p>That leads to a fourth solution, one that many countries including Brazil have resorted to: print money. This can fund spending in the short term, but in the long run it risks putting the country through hyperinflation – and arguably, this is a worse way to cover a shortfall than borrowing money.</p>
<h2>The scourge of inflation</h2>
<p><a href="http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators">World Bank data</a> show that in 1993, when Brazil’s government deficit was about seven percent of GDP, inflation was over 1,900 percent. The following year, when the country again ran large government deficits, citizens experienced approximately a 2,100 percent annual inflation rate. Two thousand percent annual inflation means items purchased at the beginning of the year cost 20 times more by year’s end. </p>
<p>This kind of inflation robs citizens of their ability to spend money. In countries with high inflation, holding cash, even overnight, can be extremely costly. For example, when an economy has <em>just</em> a 70 percent annual inflation rate, holding cash for seven days means losing about 1 percent of that cash’s value.</p>
<p>As a result, many businesses and people quickly learn that they must keep all cash balances in the bank – even if they plan to use it the next day – to earn interest and avoid inflation destroying the money’s value. Nevertheless, avoiding this wealth destruction is impossible for people who work in restaurants, bars, clubs, theaters and businesses that remain open after banks close.</p>
<p>Inflation of the magnitude Brazil saw in the early 1990s is very similar to theft. It is like theft because high inflation steals the value of a person’s money and leaves people less able to make purchases. </p>
<p>Brazil has tried numerous methods to prevent the government from overspending. For example, it has a special organization called the Federal Court of Accounts, which audits all government spending. The current crisis was triggered when this organization rejected the government’s accounting <a href="http://www.bloomberg.com/news/articles/2015-10-07/rousseff-accounts-rejected-fueling-impeachment-talk-in-brazil">for the first time since 1937</a>, setting legal grounds for impeachment.</p>
<p>So did Rousseff in fact violate the law? Other Brazilian legislators will determine that at her trial over the next few months. </p>
<p>What is especially interesting to me, however, is that while Rousseff is charged with breaking laws that are designed to prevent inflation, her alleged misdeeds did not cause inflation to spiral out of control. During her presidency <a href="http://www.inflation.eu/inflation-rates/brazil/historic-inflation/cpi-inflation-brazil.aspx">Brazil’s inflation rate</a> has been less than 11 percent a year.</p>
<h2>Helicopter money</h2>
<p>At the same time she is charged with these crimes, leading newspapers like the <a href="http://www.wsj.com/articles/what-comes-after-negative-rates-helicopter-money-1460646993">Wall Street Journal</a> and magazines like the <a href="http://www.economist.com/news/finance-and-economics/21697227-get-out-slump-worlds-central-banks-consider-handing-out-cash-money">Economist</a> are suggesting that other countries like Japan and areas like Europe should immediately enact “Helicopter Money” policies.</p>
<p>This bizarre sounding phrase simply means that governments should borrow money from their central banks and use the borrowed money to fund extra government spending, without plans to pay the money back. These articles suggest that political leaders in other countries should enact policies similar to what Rousseff is charged with employing!</p>
<p>Whatever the outcome of Brazil’s impeachment trial, it is doubtful that any Japanese or European leader who enacts the similar policies as Rousseff is charged with using will get impeached. Instead, they might be hailed as an economic savior.</p>
<p>This all makes one wonder, what is really the crime that Rousseff committed?</p><img src="https://counter.theconversation.com/content/59363/count.gif" alt="The Conversation" width="1" height="1" />
Rousseff is about to go on trial for allegedly borrowing $11 billion to fund social programs and conceal a budget deficit. Why is that a crime?Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/579612016-04-21T10:07:43Z2016-04-21T10:07:43ZCould gambling be the secret to saving when rates are so low?<figure><img src="https://images.theconversation.com/files/119535/original/image-20160420-25615-3o5x0r.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=496&amp;fit=clip" /><figcaption><span class="caption">Put it all on green?</span> <span class="attribution"><span class="source">Roulette table via www.shutterstock.com</span></span></figcaption></figure><p>Many interest rates in the U.S. are <a href="http://www.nytimes.com/2015/12/15/upshot/why-very-low-interest-rates-may-stick-around.html">close to zero</a> and <a href="http://www.wsj.com/articles/bank-of-japan-introduces-negative-interest-rates-1454040311">even negative</a> in some parts of the world, like Japan. </p>
<p>Not unexpectedly, U.S. <a href="https://research.stlouisfed.org/fred2/series/PSAVERT">savings rates</a> are also quite low as individuals ask themselves: “Why save a lot of money at a bank if I get no return?”</p>
<p>This situation has many <a href="http://money.usnews.com/money/personal-finance/articles/2015/07/15/why-our-savings-rate-is-falling-and-what-to-do-about-it">commentators</a> <a href="http://www.thefiscaltimes.com/2015/04/26/Americans-Low-Savings-Rate-Bad-Sign-Good-Economy">wringing</a> their <a href="http://www.economist.com/blogs/freeexchange/2013/04/saving">hands</a> because low <a href="http://www.jstor.org/stable/2729595">savings rates</a> are a problem for many reasons. </p>
<p>Individuals who don’t save face spending their golden years of retirement in poverty, instead of plenty. In addition, people with no savings face financial problems and potential ruin when unexpected large expenses occur and cannot help out their children with large bills like college or a down payment on a first home.</p>
<p>In the absence of a rapid increase in interest rates, which <a href="http://www.wsj.com/articles/fed-leaves-interest-rates-unchanged-lowers-outlook-for-further-increases-1458151656">appears unlikely</a>, is there anything we can do to change this problem and get people to save more? </p>
<p>As odd as it may sound, gambling could be part of the answer. </p>
<h2>A simple solution: prize-linked accounts</h2>
<p>One innovative idea for boosting low savings rates is through prize-linked savings accounts, also known as lottery-linked deposits. </p>
<p>The idea of prize-linked accounts is simple. Instead of receiving the full amount of interest on their savings, most people are given less money than they would otherwise and the remainder is distributed as prizes awarded randomly to some savers chosen by a lottery.</p>
<p>Pretend the average person receives US$2 each month in interest on a standard savings account. A bank offering a prize-linked account might instead give the account holder $1 of interest plus a small chance – slightly better than <a href="http://www.lse.ac.uk/IPA/images/Documents/PublicSphere/2015/Issue%203%20Singles/8-%20Prize-linked%20Savings.pdf">scratch tickets</a> – to win $10,000. The bank would gather the $10,000 prize money by pooling the extra dollars of interest held back from many savings accounts.</p>
<p>These lottery savings accounts are an innovative idea because <a href="http://www.wsj.com/articles/charles-r-schwab-raise-interest-rates-make-grandma-smile-1416441900">interest rates today are very low</a> and offer little or no incentive for people to save money. Low savings rates cause people to abandon traditional savings accounts and lead some people to seek higher rates of return in <a href="https://theconversation.com/explainer-whats-the-turmoil-in-the-chinese-stock-market-all-about-44457">very risky investments</a>.</p>
<p>Prize-linked accounts have the advantage of ensuring savers never lose their initial funds, unlike other forms of gambling where losers can go home empty-handed. </p>
<p>One example of how prize-linked accounts work is the <a href="http://www.savetowin.org/product-info/how-save-to-win-works">save-to-win</a> program, promoted by a <a href="http://www.d2dfund.org/overview">nonprofit with a mission</a> to boost financial security among the poor. Savers deposit their money in a special 12-month account. Every $25 deposited gets the saver one more lottery ticket. Each month some prizes are awarded, and in some locations there is also an annual grand prize of $10,000 for those people who kept money in the bank for all 12 months. </p>
<p>These rules encourage people to open accounts, leave money untouched and build savings. <a href="http://www.d2dfund.org/files/publications/STW_National%20Overview_2014.pdf">Evaluations</a> of these accounts since they began in 2009 suggest they are effective at boosting savings especially among the poor. </p>
<h2>History of prize-linked accounts</h2>
<p>Prize-linked savings accounts are not a new invention. The <a href="http://journals.cambridge.org/action/displayAbstract?fromPage=online&amp;aid=344389&amp;fulltextType=RA&amp;fileId=S0968565005000119">first lottery savings account</a> was created in England in 1693 to help fund the Nine Years’ War against France. </p>
<p>It was a great success and raised a million British pounds for the government, which was about one-sixth of all public spending that year. Savers bought tickets for £10 each. Each ticket had a chance to win a grand prize of £1,000 per year for 16 years.</p>
<p>Tickets that won nothing in the lottery, however, paid interest of £1 per year for 16 years, providing the English Crown with a medium-term loan whose proceeds were used to fight a war. This was a huge success for savers because each £10 ticket returned a total of £16, plus a chance of winning a jackpot.</p>
<h2>Controversy</h2>
<p>Controversy has surrounded prize-linked accounts ever since their introduction in 1693. Initially, criticism was leveled against the accounts because they encouraged people to gamble, which many people viewed as immoral.</p>
<p>More recently, governments have been against the accounts because they divert funds from state-sanctioned lotteries. South Africa’s <a href="http://www.bloomberg.com/news/articles/2014-09-23/the-casino-coming-to-your-corner-bank">First National Bank created</a> a very successful account in which winners received a maximum payout of about $150,000. This program <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2441286">boosted savings</a> by the poor and unbanked in South Africa. However, that country’s Supreme Court ruled the accounts were illegal after the <a href="http://allafrica.com/stories/200803311066.html">state lottery commission complained</a> that its own sales were reduced as a result.</p>
<p>While many other countries have <a href="http://www.nber.org/papers/w16433.pdf">created prize-linked</a> savings accounts, the idea is relatively new in the U.S. The first prize-linked savings accounts were created in <a href="http://www.nytimes.com/2014/08/31/business/using-gambling-to-entice-low-income-families-to-save.html">Michigan in 2009</a>. </p>
<p>The successful introduction of these accounts in other states like Nebraska resulted in President Barack Obama signing into law in December 2014 the <a href="https://www.congress.gov/bill/113th-congress/senate-bill/1597">“American Savings Promotion Act,”</a> which enabled credit unions and banks to offer these accounts across the country. President Obama and Congress needed to revise the laws, because prior to the bill it was illegal for banks to engage in risky activities such as sponsoring a lottery.</p>
<p>States, however, also have to change their laws for this program to become widespread. One of the most recent states is <a href="http://www.d2dfund.org/news/2015/06/oregon_passes_prize_linked_savings_legislation">Oregon</a>, which passed legislation in June 2015 enabling banks to offer the accounts this year.</p>
<p>Very interesting but preliminary research is being done by University of Colorado Finance Professor <a href="http://conference.nber.org/confer/2015/SI2015/HF/Cookson.pdf">Tony Cookson</a>, who examined people in Nebraska and found that the introduction of lottery-linked savings leads consumers to reduce casino gambling. This means that these lottery-style accounts can not only boost savings rates but also encourage people to gamble less in casinos. While this is a win for consumers, it is problematic for states that are dependent on casino and lottery revenue to balance their books.</p>
<h2>A ‘special’ boost</h2>
<p>Prize-linked savings accounts are not the complete solution to low savings problems in the U.S. and elsewhere. Nevertheless, these accounts can help.</p>
<p>Encouraging people <a href="http://u.osu.edu/zagorsky.1/2015/02/02/emergencysavings/">to save</a> and build an <a href="http://u.osu.edu/zagorsky.1/2015/02/09/why3months/">emergency cushion</a> for a rainy day is important. Prize-linked savings accounts are one way to do this.</p>
<p>My bank recently sent me a mailing trumpeting the fact that because I am a long-term “valued” customer, my savings account got a special interest rate boost to encourage me to save more. Even with the “special” boost, I earned a grand total of $1.27 in interest for the month. This tiny sum gives me no incentive to spend less and save more.</p>
<p>However, a prize-linked savings account that did away with all of my paltry <a href="http://businessmacroeconomics.com/">interest</a> but gave me a small chance at earning enough money to actually buy something of value would definitely encourage me, and likely many others, to save more.</p><img src="https://counter.theconversation.com/content/57961/count.gif" alt="The Conversation" width="1" height="1" />
Lottery-linked accounts helped England wage its Nine Years' War in the 17th century. Could it help the rest of us save more money today?Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/572602016-04-04T20:24:02Z2016-04-04T20:24:02ZFrom Panama papers to Brazilian bribes: why corruption is so costly<p>The news is currently filled with stories of corruption. </p>
<p>A global group of media outlets just broke the story of secret <a href="http://www.theguardian.com/news/2016/apr/03/panama-papers-money-hidden-offshore">offshore bank accounts in Panama</a>, which suggests widespread corruption in the Russian government and elsewhere. For months, stories of the Brazilian government’s <a href="http://www.nytimes.com/2016/04/04/world/americas/insiders-account-of-how-graft-fed-brazils-political-crisis.html">bribery scandal</a> have filled the news. Other headline-grabbing events include <a href="http://www.theguardian.com/news/2016/apr/03/panama-papers-money-hidden-offshore">Malaysia’s prime minister allegedly siphoning</a> almost a billion dollars from a state development fund.</p>
<p>Many stories focus on the politics of corruption. <em>The Economist</em> magazine even has an entire section devoted to <a href="http://www.economist.com/topics/political-corruption">political corruption</a>. Some stories focus on the exact details of how corrupt money flows around the world, such as a recent <a href="http://www.wsj.com/articles/malaysias-1mdb-the-secret-money-behind-the-wolf-of-wall-street-1459531987"><em>Wall Street Journal</em> story</a> on how Malysia’s missing funds actually paid for the movie “The Wolf of Wall Street.”</p>
<p>Corruption is ethically wrong and is illegal in most countries. For example, the U.S. has laws such as the <a href="https://www.justice.gov/criminal-fraud/foreign-corrupt-practices-act">Foreign Corrupt Practices Act</a> that clearly states people in business should not bribe, cheat or steal when doing business. </p>
<p>Few of the news stories, however, explain in simple economic terms why corruption is so bad.</p>
<h2>Corruption is another tax</h2>
<p>In economic terms, bribery is simply another government tax. </p>
<p>Imagine a store owner who pays a set tax each year. Now imagine each year the store owner also needs to bribe local officials for an operating permit. The tax plus the bribe affects the store’s bottom line the same as simply being taxed once by the government at a higher amount.</p>
<p>In general, taxes discourage business. When costs go up without a change in revenue, profits fall. If profits fall so low as to disappear, the reason for being in business goes away. </p>
<p>In simple terms corruption and bribery reduce the economic incentive to produce. This lowers a country’s output and drags down the entire nation’s standard of living. Bribes result in a smaller economic pie because businesses don’t expand resulting in fewer jobs, smaller legitimate tax revenue and lower output for everyone. </p>
<p>Corruption and bribery, however, have a more damaging impact than most regular government taxes. First, having to pay bribes <a href="http://money.cnn.com/2013/07/09/news/corruption-bribes/">reduces people’s trust in government</a>. Second, bribes are more damaging than a tax because the amount paid in bribes is often both unknown and highly variable. </p>
<p>The <a href="http://reports.weforum.org/global-agenda-council-2012/councils/anti-corruption/">global cost of corruption</a> is estimated at more than US$2.26 trillion a year, or 5 percent of global GDP, according to the World Economic Forum. More than $1 trillion of that is paid in bribes. <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=734184">Another study found</a> that every percentage point increase in corruption – according to an index that measures it – reduces GDP growth by 0.13 percent and GDP per capita by $425 a year. Corruption has also been linked to higher levels of poverty and inequality. </p>
<p>But beyond the direct costs, even the threat of a bribe disrupts economic activity and leaves everyone worse off. While a tax is usually known in advance, allowing businesses and individuals to plan, it is exceedingly difficult to plan and adjust for bribes since the amount is not fixed but instead is “negotiated.”</p>
<h2>A tale from Tanzania</h2>
<p>Corruption exists in forms small and large across the globe, from poor country to rich. I saw the direct impact of low-level corruption and bribery and this “negotiation” a few months ago during a holiday stay in Tanzania. The incident occurred in Africa but it could have happened on any other continent.</p>
<p>Tanzania, a large country in East Africa, is home to many friendly and welcoming people as well as awe-inspiring scenery and wildlife. Unfortunately, the <a href="http://www.theguardian.com/global-development/2015/jul/29/tanzania-corruption-aid-poster-sellers">police in Tanzania</a> can be less so. They are woefully underpaid and boost their pay by <a href="http://www.coastweek.com/_vti_cnf/3731-latest-news-Tanzania-police-seen-as-most-corrupt-institution-survey.htm">demanding bribes</a>. <a href="http://www.transparency.org/country#TZA">Transparency International</a> rates Tanzania 117th out of 168 countries on the scale of corruption. <a href="http://www.transparency.org/country#DNK">Denmark</a>, at number one, is ranked least corrupt, while the U.S. comes in at 16. </p>
<p>On my way to climb <a href="http://u.osu.edu/zagorsky.1/2015/10/26/gearforkilimanjaro/">Mount Kilimanjaro</a>, Africa’s highest mountain, I hired a car and driver for the typically six-hour trip. On the way there, we were in a shiny new Toyota Land Cruiser, in perfect working order. As we passed police checkpoints, we saw cars being pulled over. We made the drive without incident. </p>
<p>On the return trip, however, the shiny Land Cruiser wasn’t available. Instead, the company’s owner and one of his drivers beckoned us into an old but serviceable minivan. Why did the owner have to tag along? I wondered. It soon became clear. </p>
<p>Police pulled us over at almost every other checkpoint, where we waited as they examined papers and inspected the horn, the lights, even the directional signal to ensure they worked. The company owner explained that the police were looking for any kind of a problem as an excuse to take a bribe (the brand new Land Rover didn’t offer such opportunities). If even the tiniest problem was found, he told me, they would offer a choice: accept the official fine or pay a lower bribe on the spot in cash. That’s why the owner came along, to negotiate how much to pay, which can depend on anything from how rich the passengers look to whether the police had already made a good haul that day. </p>
<p>Fortunately, everything worked, and the police didn’t have an excuse to extort us. But the economic cost of corruption isn’t only cash forked over in bribes. As my anecdote illustrates, a culture of corruption is extremely inefficient, costs a lot of time (in our case a couple of hours) and leads to wasted wages, among many other ill effects. </p>
<h2>Corruption’s results</h2>
<p>One of the most pernicious impacts is that this kind of low-level corruption and arbitrary demands stymie the kind of entrepreneurial activity that drives an economy. </p>
<p>The car company owner, for example, said it made him less eager to expand his business, hire more workers and buy more vehicles. This has resulted in <a href="http://www1.worldbank.org/publicsector/anticorrupt/TanzaniaGCA.pdf">Tanzania</a> having a smaller economic pie because bribery made this owner reluctant to expand his business. </p>
<p>Corruption is highlighted by the media because the amounts being exchanged are often huge. The real reason corruption should be headline news is that it steals a bit of <a href="http://businessmacroeconomics.com/">economic prosperity</a> from every person each time it occurs.</p><img src="https://counter.theconversation.com/content/57260/count.gif" alt="The Conversation" width="1" height="1" />
The headlines are full of stories of corruption and mega scandals, but what does it mean for the rest of us? And what makes the economic cost of corruption so high?Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.